Richard Russell – Gold, Stocks, Bull Markets & “Big Money”

On the heels of continued volatility in key global markets, the Godfather of newsletter writers, Richard Russell, asks the all-important question, “How do we know when a bull market is topping out?” Russell included a fascinating gold chart and predicted that gold will break out to the upside. This is a tremendous piece where Russell also discusses how the “big money” thinks and operates in these manipulated markets.

Richard Russell: “One question I am frequently asked is, “How do we know when a bull market is topping out?” First, we must determine which sentiment phase the market is in. This is particularly difficult now because this market is being manipulated by the Federal Reserve. Normally, the stock market will only top out when it is in the speculative or third sentiment phase.

However, the best gauge as to which phase a bull market is in is the matter of values and sentiment. At this time I judge sentiment to be excited and optimistic. Nobody I read or hear is talking or writing about a bear market. On the matter of values, the S&P 500 is now selling at a rich 19.29 times earnings while the dividend yield is at a micro 2.10%. These statistics compare closely with values at previous bull market tops.

So much for the current sentiment and values for a possible bull market top. Next we must address the matter of the formation in the stock averages. The secret of a market top lies in the secondary correction, and what occurs after the secondary correction.When the Averages turn down from a high, there is no way of knowing, at the time, what that downturn means. It is what happens after the initial correction that is critical.